Thursday, August 2, 2012

The Online Nightmare Sales Tax Bill that is Sitting in the Senate

Never trust anyone in Congress. Congressmen are all about aligning themselves with certain power centers, creating new power centers, but always about expanding government in one direction or another. That said, a congressman may, not very often, but from time-to-time find himself on the side of truth, as he tries to maneuver some power center.

Senator Jim DeMint has found himself on the side of truth when it comes to the online taxes. He warns in WSJ:

The Marketplace Fairness Act recently introduced in the Senate would require online retailers to collect and pay sales taxes to states where they have no physical presence or democratic recourse. Overstock.com, eBay and the like could have to pay sales taxes to any state from which an Internet user placed an order, even if the company's headquarters, warehouses and sales staff are located entirely in other states.

Such online sales tax proposals are taxation without representation. The proposed federal law tells businesses that there is no escape from the clutches of tax-hungry politicians. That concept is antithetical to our federalist system, which promotes competition among our states for the best economic policies...

The Supreme Court ruled (in Quill Corp. v. North Dakota, 1992) that retailers can be required to collect sales taxes only in states where they have a physical presence. The proposal before Congress, however, would give a federal blessing for states to chase revenues far outside their borders.

Consider the absurdity of such a law. When a customer buys a product in a store, does the cashier ask for the customer's home address? Of course not. The store simply charges the state and local sales taxes applicable for its physical location, no questions asked.

The proposed law would hold online sellers to an entirely different standard. Websites would have to add taxes to a sale based on the shipping destination of the product, which may be a state in which neither the seller nor the buyer resides. We would never ask mom-and-pop store owners to do such a thing.

Politicians want this bill passed to raise new tax revenue for broken state governments facing budget shortfalls. But legislators in state capitals don't want to make the hard decisions to cut spending or raise taxes on their constituents—they fear the voter backlash. So they'd like their allies in Washington to make it legal for them to tax people who can't vote against them.

At its core, this is a nationally mandated Internet sales tax on businesses. Once a single state demands these sales tax collections under the new law, businesses in every other state would be forced to comply with that state's tax laws. Dozens of states are eagerly waiting to raise those taxes, as soon as Washington opens the floodgates.

The burden on Internet entrepreneurs could be staggering. There are already nearly 10,000 state, local and municipal tax jurisdictions to navigate nationwide.

Just complying with a single state's tax laws costs small businesses disproportionately more than larger firms that can afford accounting and technology teams to help them work through these arcane laws. A 2006 PricewaterhouseCoopers study found that tax-compliance costs for small businesses (those having $1 million to $10 million in annual sales) are nearly 2.5 times greater than those of larger firms. For businesses under $1 million in sales, those costs explode to 16 cents on every dollar of revenue.

And woe to online sellers if they have a dispute with one of the many states that will be unleashed to tax them. A small business owner in South Carolina could face simultaneous audits from California, New Jersey and Hawaii, with no political recourse.

Who would want to do business in this environment? That's a problem that the Senate bill's authors implicitly acknowledge, since they included an exemption for companies with less than $500,000 in annual sales. But that is a very low threshold to cross. Businesses will be discouraged from growing, encouraged to locate overseas, or even regulated out of business.

Nor would these new Internet taxes satisfy tax-hungry politicians. Already Maryland Gov. Martin O'Malley, a Democrat, has called for a 6% tax on all downloads—music, movies, e-books and more—from vendors like iTunes. It probably wouldn't be long before the burdens of complying with myriad state sales tax laws led to talk of a streamlined national sales tax to replace it, with Washington taking a cut and destroying our nation's healthy tradition of state tax competition.

Think of this another way. If online retailers are forced to drop the fiction that they do not do business within a given state becuse they simply deliver goods to a customer within that state, what about Visa and Mastercard? Can they be forced to drop the fiction that they only do business in Deleware and South Dakota where there are no usury laws? Dropping the fiction about what constitues doing business from state to state could be the best news consumers ever get. Once again, usury laws would be enforced from state to state. No more 17% to 29% interest rates on credit cards.

there really was a point for having the War for Independence. They succeeded in giving to us the most wonderful, productive nation on earth----- we just sat on out butts and let the govt. take it away from us. In Texas, we sent something like 90% of the INCUMBENTS back to Austin and Washington to keep giving us the shaft. How stupid are we

California has a SALES and "USE" tax law. California Citizens not paying the "use" tax are in violation of the law. I report and pay all my "USE" tax (Internet sales without tax) on my company's sales tax return.Don't take me wrong. I believe a complete collapse is coming! Just remember, this country was not built by a bunch of pussies. "In the dawns early light our flag was still there". Lots of violence! Fireworks! Blood and guts. Nothing is free! Does anyone connect the Fireworks of the 4th of July with the country's formation? I don't think so

Notice that it is always the other guy's political representative that is the problem. Let's give ALL the incumbents a 2 year vacation. ALL OF THEM! You can always re-elect them again to show your love.

As soon as the first state tries this Amazon, Ebay, etc will just have to suspend sales to any customers in that state. See how long that tax lasts once irate customers flood their legislators with complaints.

Actually Amazon has done an about face and now supports sales tax collections across state lines. They're cooking up ideas of more distribution centers to support zero day shipping, so they'd end up forced into collecting sales taxes due to local presence. Given that, it's now in their interest to force all online retailers to collect sales taxes. Ah, the sound of big business calling for regulations that disproportionately harm their competitors. Isn't that what makes America great?

In order to provide faster shipping, Amazon is building warehouses throughout the country. These warehouses constitute a "physical presence," which requires them to collect sales taxes, in any event. So, if Amazon is going to have to collect sales taxes under the existing "physical presence" doctrine, it may as well try to expand online sales taxes to whack its smaller competitors who don't have a 50-state network of giant warehouses.

I hope you're right but in this time politicians really don't care what the people think of them, they'll just deny they had anything to do with the tax and encourage you to vote for them in the next election. I don't think I'll ever vote for an incumbent again.

Some of the so-called "Big Box" stores have become exactly that, as one can see from interacting with staff who are paid flat salaries and lack any incentive to 'sell', as one would have with even a partial commission.

This is really an act to protect the "Big Box" retailers who already collect state and local taxes in those areas which they have physical locations. Mom & Pop don't contribute 6 figures to political campaigns (this is an election year, right?) while the big boys do.

Wal-Mart continues to raise dividends and make a profit even without this law... while paying State and local taxes.

If you sell luxury cars online, the $500k threshold is passed within days, if not hours, as sales are targeted, not profits.

If I was an e-tailer with a physical location, I would quit complaining and start competing. Your online presence might save your business.

Who cares if you go out of business because of online stores providing the same thing cheaper. Tough shit. If you think the online stores have an unfair advantage because they don't have the tax then you should be pushing to eliminate all sales tax instead of promoting theft of others.

You are ignoring the arguments of not only Jim DeMint, but the founders of this nation who did not believe in taxation without representation. If you are concerned that Internet based busiensses are taking your business, then the action to take is not to use government force to violate democratic laws to support your business, but to change your business model with the changes in the market.

That is like saying that large retailers like Walmart or Target should be banned because they take business away from the small retailers who can't match the purchasing power of the big stores. The only answer is that you have to adapt or die. You don't have an automatic right to survive. You have to find a business model that lets you provide a service that's better than what Amazon can provide. Maybe retail sales of commodity products is not it.

A "fair" tax would solve all this crap. Eliminate ALL income taxes on state and Federal level. Charge some kind of sales tax on all goods and services. Guess what? People with so-called "illegal" income would now be paying into the tax stream. Goodbye, IRS, saving Americans BILLIONS of dollars in salaries, buildings, paperwork, etc. Imagine keeping all of your paycheck? Think of the disposable income you would have? Then, if the government realized we were adults and can take care of ourselves, we can now use that money how we see fit for retirement and healthcare. The government never was, and never will be, the best place for money to be spent. And, to claim it's only "fair" for "rich" people to pay more, why would you give more money to a group of people who refuse to live within their means? It's like giving an alcholic a blank check and a ride to the liquor warehouse and telling him not to spend too much!

Amazon agreed to a settlement with Texas, and now collects sales taxes on all Amazon direct products. This was due to a subsidiary of Amazon using a warehouse in TX. When they found out about it, they closed the warehouse - but the courts have ruled that due to the warehouse, that was a presense in the state. The settlement gets Amazon off the hook for penalties and fees, and starts having to charge sales taxes to any TX customer. I don't like the government getting involved, but if I can't get the product over the internet cheaper in some way - price, taxes, shipping, etc. - then I am going to be forced to by local only - and that puts a lot of people out of business. I have always felt that it was an "unfair" advantage to not have to charge sales taxes for out of state sales, but most states sales tax laws state that the purchaser is liable for the tax if the seller didn't collect it. So instead of getting the small individual purchases to pay (by enforcing existing laws) they want the "big nasty companies" to somehow keep up with all sales tax rules and rates in all jurisdictions in the county.

Cancel all open internet orders. Never order on the internet again. Restrict all purchases to necessities, food, medicine utilities, housing. Pay cash and off the books whenever possible. work for cash off the books too. Starve the tax monster and the POSpoliticians anyway you can. Screw campaign contributions to these whores.

Don't worry Anonymous - chicks love to shop and have no patience to wait for online delivery, so you will always have business. Sorry, but the new model is the way it is - things change. Ask any blacksmith.

I read that in response to the new taxes, Amazon is planning to put warehouses around the country, and attempt same day delivery on many items, which will kill the more of those "local mom and pop " businesses. Order it this morning, get it delivered to your doorstep this afternoon.

Not only planning, they are putting the plans into action. Amazon has negotiated tax breaks from local governments to set up shop near large urban areas. They will be serving Northern and Southern California this way next year.

Dear Brick and Mortar store operators complaining about how "unfair" it is,If you can't convince your customers you provide value that isn't an e-tailer's problem.I compete for my customers with people in India and Eastern Europe. I'm not exactly crying a river for you.If you don't like how sales tax makes you more expensive than the e-tailers then talk to your state and local governments about being less spendthrift with the money they steal.Ultimately, it is ONLY the ability to avoid a tax which restrains the total amount of taxation.

The sales tax should be collected for the state where the business is located irregardless of where the product is going to. Instead of 10,000 tax codes across the nation, you have just one, instead of mailing out thousands of tax payments to various states, you have just one.

This would put the states in competition with each other to keep the tax rates low in order to attract businesses to their particular state. Encourages state fiscal responsibility too.

Off shore companies would pay a flat rate or something, you know, de-incentisize moving out of the country to excape taxes.

If you purchase something on the net, in most states you're required to pay "use" taxes on it in your state tax returns, nobody does, but that's the law in most states.

We can now kiss another chunck of the 10th A. goodbye. The Feds have no place shoving another tax down the throats of the people. For you myopic commentators who think this is "ok" and "fair". It will do nothing, nada, nichivo to "save" local business. Nothing comes for free, and as we all know with handing out "fairness", one person's savior is another's executioner. This will just cost people more for everything, increase overhead on e-businesses. If you think these greedy states will use this money for anything other than spending increases, you are an idiot. They will blow it on nonsense, give it to those who produce nothing, waste it on more forever-subsidized light rail, and then find the next "inequity" that deserves another tax, fee or regulation profitable to the gov't. Wake up, sheeple.

Just require the internet retailer to collect salestax in the state he is located in with each sale. Only one state is involved. It's like the customer came to his door and bought. He already should be collecting salestax for the state he is in. It's simple, it is fair, and it upstages the claim of the receiving state.

There are a few states that have no salestax. For fairness they would need to institute a salestax for interstate internet sales.

"When a customer buys a product in a store, does the cashier ask for the customer's home address? Of course not. The store simply charges the state and local sales taxes applicable for its physical location, no questions asked."

One option not mentioned would be a law that levies a uniform state sales tax for all states (regardless of their differing sales tax levels)with NONE of that tax going to the feds, just to the state where shipment is received. This would not completely level the playing field between brick & morter retail and on-line retail but would go a long way toward redressing the current imbalance. Let the tax rate be the average of that for all 50 states. This would be simple to administer and help states recoup the tax revenues being lost to on-line sales. Let's not seek a perfect solution at the expense of a practical partial solution.

I am an e-tailer start-up. If there is a requirement to now every sales tax amount in the nation, then I might as well limit my site to only my location/town. This a sure recipe for failure as the local economy is struggling with job closures and empty boxes called retail stores. The whole point of selling on the internet is to reach customers that may be more prosperous than the locals so as to bring some income "home to the folks", and expand the local economy spending/buying power.

I thought Dems didn't like to raise taxes. RINOs do. And apparently Reps do. They can't balance their own checkbook, but sure know how to heap it on. These taxes are definitely great enough to revolt over.

We already have such a law here in Kansas. If I sell something on EBAY to a Kansas resident, I have to collect state & local sales tax for the item. The problem is, the "local" sales tax has to be collected for the city &/or county the BUYER resides in, so I have to keep a list of all the various tax rates for every municipality in the state in order to collect the proper taxes for the sale, and then mail the tax payments to them individually. It sounds like our Senators in Washington are trying to implement this same type of plan on a national basis, which will destroy thousands of small businesses by covering them up with a mountain of sales tax paperwork. Laws like this are written for one reason, to punish small business. Remember all the bastards who are sponsoring this insane legislation on election day. Even better, contact them NOW and let them know your vote is going to be decided by how they vote on this legislation.

Why is it that articles are constantly being published and debated on the merits of some new tax proposal? Answer: because politicians are constantly coming up with some new tax proposal. Why do you almost never see an article published anywhere (hence no public debate) about the merits of a new government spending CUT? Answer: because no politician ever proposes a government spending cut to write about. I am so f***ing sick and tired of the political horse**** in this country that I'm exploring lifestyle alternatives in places like Costa Rica and Nicaragua. The problem is that I love America too much to leave it permanently. We absolutely must shrink government's size and power down to a level that doesn't require 197 days of every year to pay for it. (That's really what it now costs.) But how do you convince voters to stop voting themselves handouts from other people's money?

Why is it that articles are constantly being published and debated about some new tax proposal? Answer: because politicians are constantly proposing some new tax as a means to balance their bloated budgets. Why are there practically no articles published nor debated about a new government spending cut? Answer: because no politician ever proposes a spending cut. I'm so f***ing sick and tired of power-grabbing political horse**** in this country that I'm examining alternate lifestyles in places like Costa Rica and Nicaragua. The problem is I love America so much that I could never leave it permanently. So, how do we convince voters to stop voting for the liar who hands out the most of other people's money? How do we shrink government to a size that doesn't require working 197 days of every year to pay for it?

What the vast majority of you are ignoring is that this isn't a new tax, it's a measure to collect a tax you've been illegally avoiding paying. You've always been responsible for reporting things you owed sales tax on, the fact you never got caught doesn't mean it is illegal, anymore than not being caught for speeding means you're driving safely.

I live in a no sales tax state because it is NO SALES TAX!!! If you people want to pay sales taxes then fine, but don't force MY state to charge them. I left MD because of O'Malley. Doesn't surprise me at all that he is behind a move for on-line sales tax. He just taxed the RAIN (our "impervious surfaces", i.e. roof, driveways, sidewalks... size determines "fee" added to our property taxes) for run-off. Of course most MD citizens are unaware of it because the MSM did not report on it. Taxation has become outrageous! We must stand up against any more!!! States SHOULD be competing against each other. That keeps them a wee bit honest (maybe?).

Article 1 section 9. No tax or duty may be laid on Articles exported from any State. In order to charge the sales tax, they would need a constitutional amendment. Additionally, the way the law is stated in the article, it would probably be unconstitutional because all states do not charge the same sales tax rate.

The only way for them to do it would be an interstate sales tax law, where the would charge the same rate to all people in the U.S. on all interstate purchases.

Hi all, Another new tax is unnecessary (as we all know). Taxing the goods from the location where it is sold is the most equitable way, as long as you have to pay taxes. This might encourage people to buy or sell from outside U.S. sources, though. The only way around this type of sales would be to Tariff (as our founding fathers knew would be necessary). This would encourage more U.S. business and hopefully increase American manufacturing of products, which would be better on us, all in all. Brick and mortar stores can make their presence available via the net to expand their sales markets. If their business model and products are good this should help them. Tariffs on imports were instituted to promote buying locally (from U.S. manufacturers) and allow a more nearly level playing field with foreign companies. This would be tough at first but would help our manufacturing base, force outsourced manufacturing back home, put people to work and hopefully allow people to buy better quality products. All while increasing tax revenues without NEW taxes which add to the burdens already placed on a struggling economy. Of course, this means companies would be forced to *gasp* hire unemployed Americans! Finally, FIRE all politicians who are for killing the tariffs and rewarding U.S. companies (and CEOs) for moving plants, jobs and our money overseas. Just my 2cents worth.